The Underwriting Process: A Timeline Breakdown
Here’s what the overall mortgage process looks like, from application to closing, how long each step typically takes and how underwriting fits into that process.
1. Loan Application And Preapproval: A Few Days
When you first apply for a mortgage, you’ll typically provide information about your current financial situation. You may be asked to provide documentation showing your income, savings, debts and any other information that may pertain to your finances. You’ll also give the lender permission to look at your credit history and score.
The lender will look at all this information and determine whether you meet their qualifications for getting a loan. This will typically take less than a week to complete.
Get Your Mortgage Preapproval Letter
At this point, you may get a preapproval letter from the lender stating how much they’re willing to lend you based on your financial profile. This will help you understand your price range when you’re shopping for a home.
Going through the preapproval process before you begin your search can help you make offers with confidence and work out any kinks in your application before you go through underwriting. This can also help you save time once you’ve found your future home. The Rocket Mortgage® Verified Approval program provides even more assurance, as these approvals all entail a manual review by an underwriter.1
Find A Home And Make An Offer
Once you’ve found the home you want, you’ll make an offer and negotiate it with the seller. If it all works out, you’ll both sign the purchase agreement and you’ll be under contract to buy that home.
Next, you’ll work with your lender to get full approval and be cleared for closing.
2. Appraisal And Valuation: A Week Or Less
Whether you’re purchasing or refinancing, you’ll most likely need to get a home appraisal.
Your lender will order the appraisal. A licensed, third-party appraiser will create an appraisal report based on a physical examination of the interior and exterior of the property. They’ll also review the sales prices of recently sold properties that are similar to the property they’re appraising.
The appraisal report will include the appraiser’s opinion of the home’s fair market value. This whole process generally takes a week or less.
The appraisal is vital to the underwriting process. Knowing the home’s actual value, compared to the sale price, helps the underwriter calculate the loan-to-value ratio (LTV) and ensure that the borrower has enough money in their savings to cover a sufficient down payment.
3. Collecting Documentation And Underwriting: A Few Days To A Few Weeks
Once the details of your loan and application have been prepared, an underwriter will look over every aspect of your file and verify that you qualify for the loan and that the lender isn’t taking on too much risk by lending to you. They’ll review documents like your tax returns, W-2s, bank statements, retirement savings, pay stubs, investment account statements and any other relevant documents.
Underwriters will perform the following tasks when going over your application.
- Evaluate your risk as a borrower: The underwriter will check if you’ve defaulted on mortgage loans in the past. They’ll also look to see whether you have a strong history of making on-time debt payments and what your credit score is.
- Assess your ability to repay the loan: Underwriters want to know that your debt-to-income ratio (DTI) isn’t too high to afford your monthly payments and that you have some extra money available (known as reserves) to cover your mortgage payments if you suddenly lose your income.
- Determine if the home’s value covers the loan amount: Lenders don’t want to lend more than what the home is worth because the property acts as collateral in case you default on the loan. The underwriter will evaluate your loan-to-value ratio (LTV) and the size of your down payment.
4. Conditional Approval And Additional Documentation: A Week Or So
If everything looks good, your lender may approve your loan, or they might give you conditional approval. As long as you can meet the conditions of the conditional approval, you’ll be cleared to close. This might mean that your loan otherwise looks good, but you need to provide additional documentation.
How long this stage lasts depends on how long it takes you to get the necessary information to your lender, and how long it takes them to process it.
5. Final Underwriting And Clear To Close: At Least 3 Days
Once the underwriter has determined that your loan is fit for approval, you’ll be cleared to close. At this point, you’ll receive a Closing Disclosure. This document goes over the final details of your loan, including the loan amount, your interest rate, estimated monthly payment, closing costs and the total amount of cash you’ll need to bring to closing.
You’ll receive your Closing Disclosure at least 3 days before your closing date. Assuming everything is in order, you’ll have only a final walk-through standing between you and closing day.
